The Philippine Star

Japan central bank to keep policy on hold

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TOKYO (Reuters) - Japan’s central bank is set to maintain upbeat price forecasts next week and paint a slightly better picture of the economy than it did three months ago, signaling its conviction the country is making slow but steady progress in eradicatin­g deflation.

Bank of Japan governor Haruhiko Kuroda will likely remind markets at his postmeetin­g briefing that an exit from ultra-easy policy will be some time away, with inflation still distant from its two percent target.

But Kuroda may struggle to convince investors, who have become sensitive to even subtle signs the BOJ may follow the footsteps of its US and European counterpar­ts in dialing back crisis-mode stimulus, analysts say.

With no change to monetary policy expected at next week’s rate review, markets will focus on Kuroda’s comments and the BOJ’s new quarterly forecasts for clues on how quickly the central bank could start whittling down monetary support.

“BOJ policymake­rs have become more vocal on the cost of prolonged easing, probably to see how markets react. They can afford to do this as the economy is doing well,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The key would be yen moves. The BOJ could start normalizin­g policy this year if they are convinced such a move won’t trigger an unwelcome yen spike,” he said.

The BOJ got a taste of the communicat­ion challenge when a slight cut in its bond buying pushed up global bond yields, and Kuroda’s positive remarks on the economy drove the yen to a four-month high.

At the two-day meeting ending on Tuesday, the BOJ is seen maintainin­g a pledge to guide short-term interest rates at minus 0.1 percent and 10-year bond yields around zero percent.

It will also likely keep intact a loose pledge to buy government bonds so its holdings increase roughly at an annual pace of 80 trillion yen ($724 billion).

With exports booming from robust global demand, the BOJ is seen slightly raising its growth forecast for the fiscal year beginning in April from a projection of 1.4 percent made three months ago, according to sources familiar with its thinking.

In the quarterly review, the central bank will roughly maintain its price forecasts for coming years and stick to its view that inflation will hit two percent by March 2020, they say.

 ??  ?? Bank of Japan governor Haruhiko Kuroda attends a news conference at the BOJ headquarte­rs in Tokyo, Japan.
Bank of Japan governor Haruhiko Kuroda attends a news conference at the BOJ headquarte­rs in Tokyo, Japan.

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